Bank of Valletta said yesterday it expected a modest impact from the collapse of Lehman Brothers, the fourth largest bank in the US.
The BOV's portfolio includes a holding of Senior (non-subordinated) Lehman paper.
"Although it is too early to determine what recoveries will be made therefrom, it is believed that any ultimate loss that may arise from this holding will be modest in the context of the results of the bank for the current financial year to date," BOV said.
"The collapse of Lehman Brothers has triggered a fresh round of disruption in the wider global credit markets, resulting in greater volatility and the widening of credit spreads.
"Coming so close to Bank of Valletta plc's financial year end (September 30), it is likely that these conditions will have a material adverse impact on the results for the last quarter of the current financial year," the bank said.
The results for the Bank of Valletta Group for the year ending September 30 will be notified to the Malta Stock Exchange on October 31.
The announcement explained that, at the beginning of August, BOV had commented on the results for the third quarter of the current financial year. It had then noted that, after a period of relative calm between mid-March and mid-June, the international capital markets had witnessed a renewed bout of volatility that had been predominantly experienced in the equity sector, with the fixed income markets being affected to a much lesser extent, particularly when compared with conditions earlier in the year.
It was also noted that any additional markdowns that had been required to the date of the announcement had been comparatively modest.
"The directors observed that, subject to this state of affairs continuing, and the volatility not spreading to the fixed income sector, the board expected that the results for the second half of the current financial year would show a significant improvement over those reported for the first half," BOV said.
Lehman sought bankruptcy protection yesterday following a failed last-minute scramble to find a buyer over the weekend, weighed by losses spawned by the US mortgage crisis.